USPTO Maintenance Fees

by Dennis Crouch

[This is an update of my 2009 post on the topic]

Over half of the USPTO operational budget is derived from maintenance (or renewal) fees paid by patentees. Fees are due at 3½, 7½, and 11½ years after issuance and each subsequent fee is substantially higher. Thus, under the current schedule, the first fee is $1,130, the second fee is $2,850, and the third fee is $4,730.  For the USPTO, this comes without any costs — all the work of examining is already complete.  The funds are used to subsidize ongoing examination. The USPTO has proposed to increase the maintenance fees substantially in near future as a mechanism of raising further funds for patent operations. 

The chart below shows the percentage of patents where maintenance fee payments are made for patents grouped by year of patent issuance.  The vast majority of patentees pay the first fee, but only about 50% pay all three. The 12–year delay in paying fees makes the chart appear to be missing data on the right side.

USPTO revenue from maintenance fees has been growing over time — lead primarily by an increase in the number of patents issued; an increase in the percentage of fees paid; an increase in the fees charged; and a decrease in the percentage of small entities who pay only ½ fare.

PatentlyO129

All USPTO fees are subject to market whims and macro-economic effects.  Maintenance fees are a particular problem because a decrease in maintenance fee payments does not lead to any decrease in workload for the Office. In 2009, the USPTO was suffering under a budget shortfall and I noted that the greatest cause of that shortfall was the dropping rate of renewal.

As an aside – it is interesting to note that, even though small entities receive a 50% discount on maintenance fee payments, they are much more likely to abandon their patents and not pay the mantenance fees. [Link]

17 thoughts on “USPTO Maintenance Fees

  1. How about the UK system Dan? No annuities till after issue. The fate of the patent application (issue or refusal) and all of its dependants (ie divisionals) to be settled within 5 years of the filing date.

    The thing about prosecution at the EPO is that it is the users not the Office that want issue deferred interminably.

  2. “My family already pats me on the back. What they’d rather I did was get a lawl degree so I could help them with day to day mundane legal matters.”

    Well, just bear in mind that “Trailer Park Lawyer” is NOT a recognized “specialty” in any state.

  3. Dan, I like your suggestion.

    This would serve to put real pressure on the “compact prosecution” model, as the Office would be paying for its delay. I wouldn’t even mind shortening the max statutory reply window from 6 months to 3 to “help” speed things along.

    I would not endorse the 154(d) option, as you then conflate the purpose of holding the Office feet to the fire. An applicant’s remedy should not be held hostage to the lack of speed from the Ofice.

  4. It’s interesting that in two major revisions of the statute (AIPA in 1999, AIA in 2011) since the USA moved to 20-years-from-filing, the statute still calculates maintenance fees based on the date of issue of the patent, which is a holdover from the 17-years-from-grant system. Seems to me a system that accounts for the length of time since the earliest effective filing date would make more sense – the farther out you are from the EFD, then presumably the more valuable the patent is to the patentee and the renewal fees charged should be higher. In fact, that’s what the old system tried to do with respect to the issue date, but the current system needs to be modified to reflect the reality of the 20-year-from-filing system.

    The other thing is that having fees due at 3.5, 7.5 and 11.5 years represents too small a sampling rate. Why not have fees be due every 2 years, or even annually? That would allow for finer gradations of the fees, and I’m sure there are mathematically-inclined people who can calculate the rates that should be set to maximize PTO revenues.

    And before Max chimes in and says I’ve just described the EPO renewal system: I don’t advocate adopting an EPO-type approach. That approach just leads to laziness on the part of the patent office, since the office gets its renewal fees regardless of speed of examination. I suggest that fees only become due upon issuance of the patent, with no fees due retroactively (i.e. if your patent issues 6.5 years after filing, in the seventh year of its life, you would owe renewal fees to cover the eighth year, but not to cover any period before then.) If a patentee wanted to avail itself of relief under 35 U.S.C. 154(d), then it would have to retroactively pay maintenance fees for the pre-grant period.

  5. “In 14 years of practice I have had exactly 1 female client; she was Chinese. I have had 0 Black and 0 Mexican clients.”

    Woooooooow.

    I have to say, I see a lot of apps by people with plainly Asian names and I see quite a few with women’s names. Well, by “quite a few” I mean like more than 10 in 5 years.

    “see if the family doesn’t start patting you on the back.”

    My family already pats me on the back. What they’d rather I did was get a lawl degree so I could help them with day to day mundane legal matters.

    “because Kappos doesn’t want to drive away this important clientele of the PTO.”

    Oh yes, they’re a super important part of the pto’s “clientele”.

    “My interpretation is that this new structure is designed to keep us trophy-hunters in play. That was my only point, not to offend or belittle anyone.”

    According to PH though if you try to assert your rights in court the system will crush the trophy holder like a bug.

  6. To clarify “trophy patent:”

    I work out of my house and offer patent services on a rather modest, fixed-fee basis, so perhaps I do attract more garage inventors. I may have over-stated w/ the “bread and butter” comment.

    But even when I was with the firm, more than 50% of our clients were individuals on a low budget with absolutely no plans or vision for what they were going to do with any patent they got — mostly older white guys with the mortgage paid and a plump nest-egg. You know these guys, they are legion.

    In 14 years of practice I have had exactly 1 female client; she was Chinese. I have had 0 Black and 0 Mexican clients.

    [Somebody needs to write a post on the distorted demographics of patentees. It is, in my opinion, representative of the tragedy Americans call "the educational system." If the demographics are still wildly distorted when the playing-field has been leveled (and they won't be), we will know we have an interesting genetic phenomenon.]

    Anyway, where was I . . . oh, yeah — I am not dissing trophy patents or the people who bag them. I have three myself — never even paid the first MF on any of them; after all, you don’t have to pay the MF to be called an “inventor.”

    I have a wall full of framed paper from some fine universities, including Harvard, but those patents are my favorites. Like all paper-chasers, my ego is bigger than Dumbo’s rear-end and almost as smelly, but those patents give me the best braggin’ rights of all. I know that if I didn’t have any degrees, those trophy patents would be 10x as important to maintaining the wonky image I have of myself.

    I cannot tell you how many times when I’ve been introduced to someone as a patent lawyer they’ll say something like, “Oh, my grandfather had a patent for a . . .” These things become a part of family lore, particularly for people who never got a complete education. Patents help define not just the patentee, but his descendants. Hard to believe, I know, but bag a patent and see if the family doesn’t start patting you on the back.

    So I don’t use “trophy patent” as a pejorative. Monetary gain is not the only valid motivator.

    My previous comment was intended to say that the new fee structure is going up a lot more at the back end than the front because Kappos doesn’t want to drive away this important clientele of the PTO.

    If you look at pg 11 of the PTO’s power-point on the proposed fees, you can see that the combined filing, publication, and issue fees will go DOWN 15%. All of the MF are going up: MF1(42%), MF2(26%), and MF3(60%). Total MF increase: $8710 to $12800, about 50%, compared to the 15% decrease at the front end.

    The power-point is at link to uspto.gov

    My interpretation is that this new structure is designed to keep us trophy-hunters in play. That was my only point, not to offend or belittle anyone.

  7. To assist in looking at the data in a contemporaneous manner, can you provide a graph with the second and third fees aligned vertically with the first fee payment (axis could be per years of fees due) by timeshifting the second and third data to the right?

  8. All USPTO fees are subject to market whims and macro-economic effects.

    The thirty year data, showing as it does the very tight trendlines, seem to indicate a rather inelastic (and thus non)reliance on market whims and macro-economic effects.

    Perhaps that would serve a higher impetus for the Office decision to drastically raise the rates.

  9. “I’m sure they exist, but I suspect they are a very small minority.”

    I agree. A patent generated by any corporation/business is more than a “trophy patent.” Thus, what could be considered a “trophy patent” is generated by small-time inventors. I’ve seen a few in my lifetime of practicing, but we are talking less than 1% of all patents I deal with.

    I couldn’t imagine a practice (of any substantial size) that could subsist on the majority of the work being for trophy patents. Most people don’t want to pay $10K-30K for a trophy that will take years and years to obtain with no guarantee that the “trophy” will even be obtained.

  10. BB — Thanks for the note. You asked for some clarification.

    You said: “Your graph shows, for instance, 55% second fee paid in 1987. That is 55% of …?”

    My response: First, the January 1987 numbers are for patents issued in 1987. The second fee is due 7½ years from issuance and so was probably paid sometime in 1994. The 55% calculation uses all utility patents issued in January 1987 as the basis. I.e., the second maintenance fee was paid for about 55% of the utility patents that were issued in January 1987. Of the 45% abandoned for failure to pay the fee. Some of those were already abandoned for failure to pay the first fee and the rest abandoned for failure to pay the second fee.

  11. Interesting to note that the one link that Dennis uses to pronounce the cause of the shortfall:
    link to patentlyo.com
    also has a much tighter window of data (1998-2009).

    Looking at the graph presented here, (1987- 2011), one can see that there was indeed a brief dip – however, one can also measure that dip against a longer run scale to see that the effect of the dip perhaps was less a driver then previouosly thought.

    Also, the comments in the link of this post also explain Babbel Boy’s question, as well as raise other doubts as to the conclusions of studies of this type.

    Dennis, were any of the previous comments integrated into this update? Why or why not?

  12. About the balancing of costs in the aggregate…

    Since, as Dennis points out, the overall operating budget is paid for in half by maintenance fees…

    And since, as simple questions points out, that the Office has moved to make prosecution fees are more in line with actual costs (read that as double what they were)…

    And since, as Dennis points out, that maintenance fees are also nearly double…

    The overall intake: 50% pros fees + 50% mnt fees becomes
    100% pros fees and 100% mnt fees = 200% of budget fees (of actual current work)…

    However…

    This matter of balancing in the aggregate means that the Office must somehow scale back its collections by 100% (of the 200%).

    No doubt, some of this will be done with reduced fees…

    But how much will that cover?

    Not much. Especially when one looks at who the actual users of Office services are.

    Something has to give.

    What?

    The obvious answer is amount of work. The Office is apparently planning on doing roughly half the work, which will make the aggregate balance.

    So with roughly half the work actually being planned to be done, wait time will necessarily scyrocket. Add in an examining crew whose quality is suspect to begin with (and now challenged with the complexity of dual sets of law), any gains from fee drops are quickly lost in the shuffle.

    Bottom line result of the AIA:

    Cost more, get less, take longer.

    Now that’s the Re-formed Office for you.

  13. This structure is, essentially, to encourage trophy patents, which are the bread and butter of most patent lawyers – the inventors who just want the prestige of having a patent but will never exploit it commercially.

    I doubt very much that these inventors are “the bread and butter of most patent lawyers.” This is only my personal experience, of course, but I don’t know any patent lawyers whose practice primarily caters to inventors who have no significant business purpose for their patents, or even to inventors at all, as opposed to their corporate employers. I’m sure they exist, but I suspect they are a very small minority.

  14. Is “trophy patent” too belittling a phrase?

    Just because that particular person (the patentee) does not exploit it commercially, is it any less a patent?

    Did it somehow undergo any less an examination?

    Can whether or not something is exploited post-grant actually be known apriori?

    Did it any less contribute to the promotion of the arts?

    The cost of the examination is figured in

    Is this true anymore, as the Office has concurrently moved to make prosecution fees more in line with their actual cost?

    Does this count as a windfall for the Office?

    How does this fee structure fall into the necessary zeroing out per fiscal year in the aggregate, as required by law?

  15. Clarification, please.

    Your graph shows, fer instance, 55% second fee paid in 1987.

    That is 55% of . . .?

    The number who paid the first fee?? The total number of patents issued 7.5 years earlier?

    And I would hesitate to agree with: “For the USPTO, this comes without any costs — all the work of examining is already complete.”

    You’re not thinking holistically. The PTO revenue structure doesn’t really permit one to say the maintenance fees are without a cost. The cost of the examination is figured in.

    This structure is, essentially, to encourage trophy patents, which are the bread and butter of most patent lawyers – the inventors who just want the prestige of having a patent but will never exploit it commercially.

    The proposed fees are huge in the back end – that last maintenance fee. Huge. As I noted in a prior thread, the PTO’s power point hides the enormous jump.

    Thank you. Just wanted to get the first comment. It’s an honor.

  16. Dennis -

    Can you provide statistics on maintenance fee payments by Non-practicing Entities? For example, are they paying 100% of their fees? Are they subsidizing the rest of the system? What percentage of total maintenance fees are paid by NPEs?

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